Downside Possibilities Limited; Index Likely To Meander Towards The 11,400 Mark

After four consecutive weeks of meandering base formation, the NIFTY had a bullish week, smartly rising 129 points. Despite remaining bearish for most of the final trading session on Friday, the index rose sharply by over 100 points at the penultimate moment, as benign inflation data prints fuelled hope for yet another rate cut. Retail inflation inched up slightly, to 3.21 per cent in August, while industrial production growth slowed to 4.3 per cent in July, making a strong case for another rate cut by the RBI next month. A strengthening rupee and signs of easing tension in the ongoing US-China trade war aided the cause.

On the technical front, the NIFTY formed a bullish engulfing candle pattern, while completing a decisive bullish crossover from oversold levels on the stochastic oscillator. The next major resistance is at the upper Bollinger Band level on the daily charts, which is around the 11,175 mark. On the weekly charts, the next major resistance is at around 11,400 levels (20 -week moving average), and we should most likely see the index zig-zagging it’s way to those levels over the next few weeks.

Broadly, the trend and momentum have turned bullish, notwithstanding today’s bearish opening due to the sudden spike in crude resulting from the attack on the Saudi facilities Fence sitters may consider increasing long positions in equities rom an investment standpoint. Since the momentum is likely to be weak, short term trading bets may not pay off. This certainly isn’t a traders market, and swing as well as positional trades are therefore discouraged.

DISCLAIMER: Futures, stocks and options trading involves substantial risk of loss and is not suitable for every investor. If you do not fully understand these risks you must seek independent advice from your financial advisor. All trading strategies are used at your own risk.